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Oil/Gas/Lease options versus top leasing


Good morning. I have some Montana properties that are currently leased by a Canadian company on the basis of a 5 year initial term, with an option to renew for a second 5 yr term. The initial 5 year term is about to expire in the next few months. However, another oil firm is considering top leasing. My question is - what has legal priority - does the existing lessor with its option or would a new oil firm with a top lease? In other words, does the new oil firm have any chance to get the leases if the existing lessor elects to exercise its option to renew? Or would the new oil firm have to take the chance that the existing lessor elects NOT to exercise its option and allows the leases to expire? Many thanks for your assistance! Regards Chris

The new potential buyer can top lease you if they want to, but if your current lessee decides to extend its option prior to your initial primary term extension, then the new potential buyer would be out of luck for another five years so I doubt they'd be willing to pay you any money until they know for sure your current lessee is not planning to extend.

You might also check your current lease for a "top lease clause" or more accurately, a "right of first refusal clause." If there is one, then you'd have to run any offer the new lessee made (prior to expiration or extension) past your current lessee and give them the chance to match it before you could lease to the new company.

The above is why I rarely agree to either extension options or right of first refusal clauses in my own leases.

Hope this helps you out.
Frederick M. "Mick" Scott CMM RPL
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Frederick M. Scott


Oil and gas leasing, lease negotiations, how to best deal with the oil and gas companies or their representatives, buying/selling mineral rights, forced-pooling, correlative rights, deeds and conveyances, and "post-production" costs. I am most experienced with Oklahoma properties and laws, but am able to answer questions concerning other oil and gas producing states in many cases.


I am a Certified Professional Mineral Manager (CMM) certified by the National Association of Royalty Owners (NARO) in Tulsa, OK. I am also a Registered Professional Landman (RPL) with the American Association of Professional Landmen (AAPL). I have managed my family's oil and gas properties in Oklahoma for over 10 years and have dealt with many landmen, title analysts, attorneys and other oil and gas professionals in the process. I have written several articles which have appeared in various oil and gas industry magazines and newsletters. I have negotiated and drafted leases, prepared deeds, affidavits, and other legal instruments relating to my own minerals, as well as performed title, legal research, and curative work for same. I have acquired a good deal of knowledge on the subjects of oil and gas law, mineral appraisal, and landwork over the past ten years, and also worked as a professional landman and lease buyer for a time. I've seen the business from "both sides" and therefore feel confident I can help out most of the folks who ask questions in this forum.

National Association of Royalty Owners (NARO); American Association of Professional Landmen (AAPL)

National Association of Royalty Owners "Action Report" (ROAR); NADOA Magazine, The Mineral Hub, Landman Magazine, and several royalty owner association group's newsletters.

Certified Mineral Manager (CMM), Registered Professional Landman (RPL)

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